While the cost of college continues to increase, financial aid is widely seen as a mechanism to create opportunities for students to gain access to higher education. But just the availability of financial aid as it stands will not solve the college affordability problem, according to new research published this week.

The article – written by Sara Goldrick-Rab of Temple University and Tammy Kolbe of the University of Vermont, Burlington – argues that the financial aid system as it is currently designed fails to address certain barriers to college access.

“We argue that these failures are due, in part, to policies that were built on a narrow set of behavioral assumptions about the role of pricing in individuals’ decisions to attend college,” the authors wrote.

Although financial aid – in the form of grants – is meant to reduce the sticker price of attendance for colleges, continual increases in college prices, a failure of investments in federal and state aid to keep pace with college costs, and declines in household incomes render current financial aid policies less effective than in the past, the authors wrote.

“As a result, many Americans are either priced out of college or are undertaking extraordinary measures, including amassing large amounts of debt, to obtain a college degree,” Goldrick-Rab and Kolbe wrote. “Low- and moderate-income students have been hit hardest by increasing prices, strengthening ties between household income and college attendance or completion. At the same time, the costs of funding subsidies to higher education have gone up substantially. The response has been widespread bipartisan criticism of existing federal financial aid policies.”

The authors identify four problems with the current financial aid system, including:

Transparency and Ambiguity: The world of financial aid is complex, and current policies assume that students and families understand college pricing and the role financial aid plays in making college within reach. However, there is great ambiguity in the cost of college, the authors argue, as the net price varies both across colleges and universities and within institutions. The method used to calculate a family’s contribution – the expected family contribution (EFC) – is “notoriously complex and problematic,” they wrote.

The Cost of Complexity: The complex nature of applying for, receiving, and maintaining financial aid itself is a barrier for many students and families, according to the article. “Students who are chronically uncertain about their ability to pay for college spend more effort pondering whether to attend and remain in school,” the article said.

Perception and Motivation: “In the current system, many children and their families perceive college as expensive, and even though sometimes inaccurate, their perceptions appear to affect their behavior, reducing effort invested during high school,” the article said. However, social psychology research suggests that providing contextual information about college affordability can increase the odds of a student attending college.

Community Context: The financial aid system as it stands assumes students conduct their own cost-benefit calculations about attending college. “However, for many students, decisions about college affordability are interdependent, or relational, and occur in a community context,” the article said. “The cultural models of individual decision making (student as independent consumer) represented in the current aid system reflect mainstream middle-class values and can alienate students who value interdependent decision making.”

Goldrick-Rab and Kolbe proposed creating a new financial aid system with a clear and unambiguous approach, such as those found in universal models of financing.

“Shared pricing models, common to an entire community, require all parties to work together, and are simple to communicate,” the article said. “They are financed collectively, via progressive taxation, a relational approach that better aligns with the values of marginalized people. Social programs that benefit everyone, regardless of income, reduce the sense of unfairness among parties and improve social cohesion.”

Publication Date: 9/14/2016

Kimberly L |
9/14/2016 11:38:31 AM

I am a firm believer that personal finance should be a mandatory class taken in ninth grade. I have been a financial aid administrator for more than 25 years. Far too often, students and families start to "plan" how to pay for college during the student's senior year, all the while spending money on proms, photographs, and other senior year expenses. Even if a high school student has no intentions of going to college, they can benefit from a personal finance class. Every adult should know how to finance a car, finance a house, and plan adequately for retirement. In addition, to knowing how a FICO score follows them their entire adulthood. I could go on and on, however, I have files that I need to review. Have a great day, everyone! :-)

Paul G |
9/14/2016 10:31:57 AM

A very interesting approach to understanding college affordability. Pricing models alone are not sufficient to explain consumer behaviors. More qualitative studies are needed to investigate these theories further. Most quantitative studies cannot fully explain college affordability from the consumer's perspective within the communal context.

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